Self Directed IRAs

In light of the recent posts suggesting DPers cash out their 401(k)s to avoid a potential government take over I am interested in Starting a discussion about Self Directed IRAs.

There are # of pitfalls to cashing out a 401k - the big one being the tax and penalties which could essentially be giving 50% or more of your retirement over to the government. I am trying to find a solution that does not involve taking a massive penalty and tax yet perhaps minimizes the risk of a government take over.

Taking a 50% hit is one thing if your 401k balance is $20k, but as it gets to be ten times that or more one really needs to think through these things.

I am currently leaving my employer of 8+ years and will be rolling my 401k over to an IRA. I recently learned about self directed IRAs that allow for a bit more control and investment options. Options like real estate and bullion.

What do you all see as potential risks for Self Directed IRAs?

How do you see perhaps Self Directed IRAs offsetting some of the risk associated with a government take over of IRAs and 401(k)s?

I would be happy to post a link of a company I am considering using, but I don't want to appear to be pushing a particular company. One option i like is that they will store the bullion outside of the U.S. In this case the location would be Hong Kong I think.

It is the CUSTODIAN who makes the rules on what can and cannot be done.

There are ways that a person could roll a 401k over to an IRA without penalties, BUT most custodians won't allow it because they don't want to lose control over the money. Depending on the company, if management becomes aware of what is POSSIBLE and they have employees who want to do it, then they could force the 401k custodian to change the rules or change custodians.

At the individual level with an IRA, there is "self-directed" and then there is REALLY self-directed.

If you put your funds with the typical stock broker, you can "self-direct" what you want to invest in, BUT only within the confines of what that broker offers.

OTOH, if you get a true, independent custodian, then you could invest in just about anything. Once you are set up with one of those companies, then you could "invest" all funds in a limited liability company (LLC) and then YOU could manage it (just can't take any money out personally).

Once the funds are in an LLC, then you have maximum flexibility, control, and privacy of what you do with the funds. In a pinch, you could even set it up offshore and have your funds set up in such a way that nobody -- not even US gov.'t -- could get to it.

But ... that is not for everyone. There is a spectrum of things that can be done, depending on how complicated you are willing to get.

The end of your post regarding creating an LLC where you are the fund manager is exactly what the survival podcast interview with Rob Gray of the AOCS is about. He talks about the fund buying physical gold and silver that you, as the manager, can then put in a safe deposit box, under the floor boards of your home or buried out in the yard.